when companies sell your mortgage (loan, premium, approved, credit)

[cclee]

When I got my mortgage they immediately sold it to another lender within a month of me having it. I was just wondering how much does the original lender stand to make by selling mortgages to other lenders? I figured there must be some sort of incentive for them because they did it so fast. Just curious.

[renriq02]

they clear it as soon as possible so they can 'clear their books' to fund more loans.

i think the lender that ends up servicing it makes the most $$$

[chet everett]

I disagree. There are different costs associated with the different phases of the mortgage business. For high volume origination companies, high volume funding companies and high volume servicing companies they can EACH specialize on their strengths and gear their firm to what makes sense for them. Each can be profitable and each can have risks.

It is sorta like how there are some companies that make lots of little cars, other companies that make lots of luxury cars, others that make buses or heavy trucks. All have lots in common but few try to do it all.

It is not about "big incentives" it is about specialization. That allows the firms to do with they are best at and maximize the odds that they can use their resources efficiently.

[bornandraised atl]

3 ways or 'channels' to get a mortgage and how each pays the mortgage company...

*Retail Channel (Wells Fargo, Bank of America, Chase, etc)

Simply go to the bank or go through a bank rep - they will take you application, approve you, lock you rate, send their money to close you, and you make your payments directly to them. They keep ALL the profits that they can ---AND hope to earn 'market share' - which helps with their bank deposits....most mortgage divisions are viewed by the banks that own a necessary evil - it is the best way for them to begin a banking relationship which is what they want...

They get a stream of income from the loan fees and rate premium, to servicing fees, and interest on the loan

*Correspondent channel this is probably who you got your loan through (Lesser known national - maybe region specific or city specific)

These folks will take your application approve you, lock you in with a company they have been approved with to offer their mortgage loans ---(this is where it gets interesting, Example: Wells Fargo and SunTrust have looked at this company's finances and operations and allowed them to offer their products and rates without their name being on the building, which helps them spread market share in a cost effective way - no staff, utilities, etc. in hopes to get more bank customers --- or simply earn servicing fees), and close you with their own money on what is called a 'warehouse line of credit'(a topic for another thread) - then they ship your final file out to the investor and have their line of credit replenished.

They are paid once off of fees charged and any rate premiums paid (which you as the consumer will not know with this channel- called Yield Spread Premium) when the loan is purchased by the company they locked it through - and sometimes they get a service release premium (another thread topic) - that is how this channel gets paid...their risk is if the loan defaults within a specified time period - usually 6 months

*Wholesale Channel --(Mortgage Brokers) - They take your application then send it directly to the company where you will be approved, locked, closed, and funded.

the broker gets paid once at closing through fees charged and rate premiums - Which will be shown on your closing statement...

Long answer but this is it in a nutshell....the pro's and con's of each for another day...